Canadian dollar ends near 4-week low

Tue Feb 19, 2008 5:35pm EST
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By Frank Pingue

TORONTO (Reuters) - The Canadian dollar closed at its lowest level in nearly a month against the U.S. dollar on Tuesday, as domestic data supported expectations of a Bank of Canada rate cut and offset any benefit from higher oil prices.

Domestic bond prices took their cue from the bigger U.S. market and finished lower across the curve ahead of a domestic retail sales report due later this week.

The Canadian dollar closed at C$1.0171 to the U.S. dollar, or 98.32 U.S. cents, down from C$1.0075 to the U.S. dollar, or 99.26 U.S. cents, at Friday's close.

Data that showed Canada's wholesale trade fell more than expected in December weighed on the currency, which later went on to hit a session low of C$1.0174.

The data followed another domestic report that showed core inflation, which helps guide Bank of Canada interest rate decisions, slowed to 1.4 percent in January, in line with forecasts.

"The market is starting to react to concerns that maybe the activity data in Canada is weaker than currently anticipated, which further emphasizes the importance of the retail numbers on Friday," said Matthew Strauss, senior currency strategist at RBC Capital Markets.

"But, having said that, I am a little bit surprised about the extent of the selloff in the Canadian dollar."

The data has all but cemented a rate cut in March, especially since there is not enough economic data left to sway the central bank's decision before March 4. But the size of the cut is still up for debate.   Continued...

<p>A Canadian one dollar coin, also know as a loonie, is shown in Montreal, April 28, 2006. REUTERS/Shaun Best</p>